(Reuters) - Better-than-expected Chinese growth data on Wednesday boosted Asian currencies, driving the yuan to a one-week high and putting a dampener on the U.S. dollar.
A blast at a Gaza hospital, however, kept moves modest and traders on edge at the prospect of a widening conflict. U.S. President Joe Biden is due to visit Israel on Wednesday.
Official data showed China's economy grew 1.3% in the third quarter, accelerating from 0.5% in the previous quarter and topping market forecasts for an increase of 1%. Industrial output rose and unemployment fell.
China's yuan hit a one-week high of 7.2905 per dollar, though it then retreated to 7.312. The China-sensitive Australian dollar, was last up 0.24% at $0.6381, while the New Zealand dollar was 0.18% higher at $0.5907.
"The Kiwi and Aussie are outperforming, but I'm surprised that (the data is) not having a little bit more of an impact given how negative views have been on Chinese growth," said Erik Nelson, macro strategist at Wells Fargo.
Nelson said investor reaction to the Israel-Hamas conflict had so far been muted. "If it spread to other regions which get pulled into the conflict, like Iran, then that's another story, but we're not there yet."
The dollar index was marginally lower at 106.19. The gauge, which tracks the greenback against six major peers, rose 0.53% on Tuesday but remains below an 11-month high of 107.34 touched last week.
"It's had a really good run and it's stalled a bit," said Westpac analyst Imre Speizer. "Maybe it's hitting the limits of this stage of the rally, and needs a bit of a correction."
The euro was steady at $1.0571, while sterling was up 0.1% at $1.2194 after data showed British inflation failed to fall as expected in September.
Israel's shekel was pinned to the weaker side of 4 to the dollar, around its lowest since 2015.
Since mid-July, the benchmark 10-year Treasury yield has climbed about 100 basis points and the dollar index has surged around 7% as the U.S. economy has shown no signs of slowing down.
On Tuesday, U.S. yields shot higher after data showed retail sales increased strongly, which had helped the dollar pile pressure on the Japanese yen, where ultra-loose monetary policy is suppressing returns on bonds.
The yen was last up slightly at 149.69 to the dollar. The Bank of Japan on Wednesday unexpectedly announced $2 billion in bond-buying to keep downward pressure on yields.
The 150 yen mark has become a key psychological level after past government interventions to prop up the currency occurred around that point. Earlier in October the yen rallied sharply after falling past 150, although it later fell back and early indications suggest Japan did not intervene.
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